Demand for rentals soars in Southwest Florida

An influx in new demand for residential leases is now pushing rental occupancies in Sarasota and Manatee counties to well beyond those in powerhouse national markets.

JOSH SALMAN

The cost of residential rent in Southwest Florida is climbing at one of the fastest rates in the nation, as recession-battered borrowers pushed out of their homes through foreclosure turn to leased apartments for a place to live.

From college students to young families and retirees, an influx in new demand for residential leases is now pushing rental occupancies in Sarasota and Manatee counties to well beyond those in powerhouse markets like San Francisco, Manhattan and Chicago.

Coupled with appreciating home prices for buyers, the cost of basic shelter in Southwest Florida is now outpacing wage adjustments for the first time since the housing slump took hold six years ago.

"Anything I have that's rentable is rented," said Harvey Vengroff, who operates 1,400 workforce housing rentals in greater Sarasota. "People who work at the mall or in a labor job can't afford the rents that are out there. That's the market we're moving into."

Sarasota-Bradenton-Venice showed the fourth highest rental demand of all metropolitan statistical areas in the nation, boasting an average occupancy of 96.9 percent during February, according to the apartment data provider Axiometrics Inc.

That demand has been propelled largely by a housing crisis that dumped half a million foreclosures onto the Sunshine State's economy. With credit too bruised to immediately buy again, those evicted borrowers have been forced to seek out rentals.

More retirees and young professionals migrating to Southwest Florida also are choosing rentals over home ownership, largely for the flexible lifestyle that a lease can provide. Others who previously considered buying have turned to apartments because of fears that another housing bubble could be affecting home prices.

The result has been rising average rental rates in Southwest Florida that are now accelerating at the sixth-steepest pace in the nation: 6.68 percent, or nearly double the national average.

"Florida was one of the single-family housing markets hit hardest by the downturn," said Axiometrics president Ron Johnsey. "You're looking at a lot of sentiment there that's against home ownership. It's just more difficult to buy houses and more difficult to qualify."

Rental occupancy across the nation also remained strong at 94.1 percent during the first quarter. A year ago that rate stood at 93.7 percent, Axiometrics reported.

But Florida is leading the pack, with three of its communities — Bradenton-Sarasota-Venice, Naples and Miami — among the nation's top markets for occupancy demand.

Investment groups moving in

Wall Street has taken notice.

Investment giants like The Blackstone Group, a New York-based hedge fund, have been snapping up foreclosures across Southwest Florida for use as rentals.

Outbidding other buyers on the courthouse steps — sometimes paying as much as 45 percent above value for their homes — these groups also are helping boost median home prices, an increase $21,800 during the past year, Realtor data shows.

With job gains slow to keep pace, some analysts now worry the cost of basic housing in Southwest Florida is growing beyond what the market can sustain — a fear that also was strongly pervasive during the real estate boom.

The trend shows no signs of stalling in the coming years.

Although the recent uptick in single-family rentals has helped bring more product to the market, supply of apartment units remains at its lowest levels since the mid-1990s, records show.

That is largely because of a multifamily construction industry that essentially vanished during the prolonged recession and the fact that so many developers and investors converted apartment complexes in Manatee and Sarasota counties into condominiums during the boom.

That has put a serious pinch on rental inventory.

'Phone calls are off the map'

Axiometrics expects rental prices in the broader Sarasota market to continue growing at a rate of at least 3 percent annually through 2017.

The average lease rate in Sarasota now stands at about 89 cents per square foot.

"The phone calls are off the map — we can't even service it," said Stan Rutstein, a commercial broker with Re/Max Alliance Group, who works with many multifamily rental deals. "We're just at 100 percent, and when we do get a vacancy, it's filled within two days."

Sensing the shift, developers now are planning or starting a number of new multifamily projects, a level of activity not seen since the housing market's historic rise almost a decade ago.

One of those projects is coming from an Atlanta-based multifamily developer that plans to break ground within 30 days on a 237-unit complex near the southern heart of Lakewood Ranch.

The Venue at Lakewood Ranch will become just the third traditional apartment complex within the bounds of the master-planned community, and comes as its predecessor, Lost Creek Apartments, was fully rented out in just seven months, said Brain Kennelly, president and broker of LWR Commercial Realty, the commercial and multifamily arm of Lakewood Ranch's developer, Schroeder-Manatee Ranch Inc.

"That kind of confirms the demand," Kennelly said. "The foreclosures drove a lot of that, with people not being able to finance. They need to build their credit back up before they can go back into a single-family home."

At Sarasota Management & Leasing, average rents for the company's 300 properties have risen 8 percent during the past year.

The firm now has only 10 properties available to rent. It typically has at least double that amount.

"We're in a growth period right now in terms of supply and demand," said Scott Corbridge, the firm's broker and president. "The question in my mind is when are all these rentals being purchased by Blackstone and others going to hit the market because it has been a slow process."